Suzuki’s Marketing Strategy in the U.S.

SUZUKI'S MARKETING STRATEGY IN THE U.S.

MARKET ENTRY STATEGY: Suzuki changes its policy many times according to the market requirements.

At first they entered in the US market as exporter of a single product (only motor cycle) with pure vertical integration. In 1964 Suzuki began exporting motorcycles to the United States. It established a wholly owned subsidiary, U.S Suzuki Motor Company, Ltd., to serve as the exclusive importer and distributor of Suzuki motorcycles.

Then it began to export multi products and out sources its one brand: In 1983, General Motors (GM) purchase 5% of Suzuki hand helped the company a subcompact car for the US market. The car name was Chevrolet Sprint, it was the first entry into the continental US automobile market. And it was introduced regional basis only in the West Coast.

At last they decide to go for manufacturing in foreign land: GM's success with Sprint showed Suzuki that a market existed for its cars in the continental of United States. So the company planned to introduce several unique vehicles into the U.S market over time. Suzuki had no guarantee, how ever, the GM would be willing to market the vehicles. Therefore, Suzuki decided to establish its own presence in the US automobile industry.

Japan's voluntary restrain agreement (VRA) quotas made it impossible for Suzuki to export any cars other than the Sprint to USA in future. So in 1985, Suzuki and GM began negotiations with the Canadian government to build a plant in Ontario that could produce approximately 200,000 subcompact cars per year. Suzuki management expected the plant to be on line by early 1989, and the company could then begin selling cars in the USA under its own name.

But the US market was growing market and was very lubricated for both Japanese and other foreign competitors, and Suzuki managers believed that clutter might limit their success if they waited until 1989, they were convince that it was the right time to enter in USA. And in 1985 Suzuki introduced the SJ413 an upgraded model of SJ 410 and designed specially for US market.

On May 10,1985 Suzuki hired Douglas Mazza to organize and to head of its subsidiary ASMC, he was responsible for both developing dealer network and making marketing plan for SJ413. Suzuki planned to market two versions of the Samurai in USA, a convertible and a hard top.

DISTRIBUTION: Mazza's goal was to establish ASMC as a major car company in U.S. To accomplish this objective he adopted the following steps: Convince prospective dealers to build separate showrooms for the Samurai.

Then he designed a dealer agreement that required prospective Samurai dealers to build an exclusive sales facility for the Samurai including a showroom, sales offices, and a customer waiting and accessory display area. The dealers were required to dedicate minimum of two service stalls to Suzuki, which had to be operated by Suzuki-trained mechanics.

Required dealership to display specific signs and outside the sales office and in the service stalls.

A minimum of three salespeople, two service technicians, one general manager, and one general clerk had to be dedicated to the Suzuki dealership.

The bullet points above are illustrating the fact that the company followed the selective distribution (close to exclusive distribution) It allowed the company to achieve higher profitability, dealer loyalty, greater sales support and also higher degree of control over the retail market.

PRICING POLICY FOR DEALERS: Price is the only marketing variable that generates revenue. Though it is close to exclusive distribution that is characterized by high margin, high profit and low volume, Mazza adopted with an opposite view. The company aimed to gain market response for its high quality with low price advantage. Thus their strategy was to sell high volume with low profit margin. Thus ASMC's planned retail price for the basis Samurai was $5,995. The planned dealer invoice price was $5095, only 7.5% higher than ASMC's own landed cost for the vehicle. Additionally they planned to offer about 50 dealer installed option, the sale of which would boost a dealer's unit profit. Each dealership's needed to sell approximately 30 Samurai per month to cover its investment and operating expenses.

ALLOTMENT TO DEALER: Mazza planned to limit the number of samurai dealers so that ASMC could guarantee a minimum supply of 37 units. Suzuki had set Mazza the goal of selling 6000 Samurais in first six month. But later realizing far more potential of the market, Suzuki raised its commitment to ASMC to 10,500 vehicles for the same time